Tag Archives: Crony Capitalism

The California Energy Commission (CEC) said, “Eureka, we have a refulgently brilliant idea! Let’s require installation of solar panels on new home and low-rise apartment building construction.” Assuming the California Building Standards Commission ratifies the CEC’s proposal (a purported slam-dunk) it will take affect starting January 1, 2020. Less than two years from now.

”The case for this was extremely strong,” [1] CEC commissioner Andrew McAllister said. “[In] California, we do believe in climate change, we do believe in facts … It’s become clear to all of us it’s the right thing to do and that the marketplace is ready.”[2] the UPI reported.

In light of their actions, what the CEC doesn’t believe in are: 1) carbon-free nuclear power plants, 2) consumer choice, or 3) free markets. California has bent to activist pressure and already closed the San Onofre nuclear power plant. Diablo Canyon’s nuclear power plants will close in 2024 and 2025. When the Commish said, ”[T]the marketplace is ready” he didn’t mean a marketplace where you get to choose what you want. He meant a marketplace where you get to pay for what he wants. He meant delicious gooey Crony Capitalism[3], where well-healed, well-connected lobbyists convince bureaucrats to employ the lobby’s preferred remedy.

According to NPR, “Representatives from construction groups, public utilities and solar manufacturers all spoke in support of the plan, which they’ve helped the commission develop for years,” the AP reports. “No industry groups spoke in opposition.” Of course, no groups spoke in opposition: the benefits are concentrated in a few industries and the harm is dispersed among many lower income people and potential homeowners.

The result is Crony Capitalist Pork. Keeping with the meat metaphor, I have no beef with these groups representing their constituents, but I don’t have to like the result. I like markets to sort out such things. Government’s role is to enforce contracts between individuals and protect citizens from crimes against themselves or their property. Beyond that, government’s top-down approach hampers market-driven, bottom-up solutions.

And the bottom line to everyone–but especially the people on the bottom economic rung–is it effectively takes money from their pockets to pay for this scheme. Under this program, everything is going to cost more, especially housing. And not just newly constructed housing. All housing will cost more, including rentals. Look for an upturn in people looking for existing homes because they’ve been priced out of building new. This will force prices up. It is obvious that the CEC does not understand supply and demand curves, incentives, or anything from a basic economics course.

Unlike Classical Liberals, Progressives within government are sure they know not only how to diagnose a market problem, but how to “fix” it with a sure fire prescription. It’s like your nosy neighbor telling you what’s wrong with your life and has the answer to help you. Now imagine she has the power to force you to do it. That is what the CEC has done. As Veronique de Rugy writes on Reason.com, “These members of the ‘government within the government,’ produce one freedom-restricting, economy-hindering rule after another without much oversight. These rules take many forms, and few even realize they’re in the making—until, that is, they hit you square in the face.”

Photo Credit: Libertarianism.org

The progressive Los Angeles Times editorial boardis all for punching you square in the face. “Of course California should require solar panels on new homes,” An LA Timesopinion piece gushed.

The opening paragraph says, getting punched in the face is good for you.

The benefits of solar power are well established. Photovoltaics harness the sun to create electricity, reducing the need for dirtier forms of energy. And residents generate their own power, cutting their utility bills.[4]

There is so much wrong with this paragraph. It begs the question with “The benefits of solar power are well established.” No, the benefits of solar power are not well established. As Michael Shellenberger, President of Environmental Progress notes, If Solar And Wind Are So Cheap, Why Are They Making Electricity So Expensive?“Electricity prices increased 24 percent in California during its solar energy build-out from 2011 to 2017.” And from 2011 to 2017, California, a state whose progressive leadership is committed to renewable energy, saw electricity rates rise to five times higher than the national average. And California is not a one-off in the rate hike department. Germany, Denmark, and Spain already blazed that trail.

The Times editorial goes on to say, The energy commission’s new building standards, which require both solar panels and upgraded insulation, air filters and other efficiency measures, are expected to raise the cost of a new home by $9,500. That’s about half the cost of installing solar systems on existing homes (although tax breaks and other financial incentives can lower the bill). And homes built to the new standards are expected to use 50% as much energy as homes built in 2016 without solar panels….

Yes, the new standards will increase the cost to build homes and apartment complexes. That’s a concern in California, which is in the midst of a housing crisis because it failed for years to build enough homes to keep up with population demand. However, energy-efficiency investments save money over time. The energy commission estimated the new standards will add $40 per month to the average new home mortgage payment, but save $80 per month on heating, cooling and lighting.

The installation cost appears correct though it may turn out to be higher. It is the anticipated savings in energy that they expect that should trouble you. Federal and state governments continue to press for efficiency as a way to save fuel (in order to lower greenhouse gas emissions). And they are usually dead wrong. Too often, government officials do not consider The Energy Efficiency Paradox. Basically, if you save money on one thing, you have money for more of that thing or of something else. If your house is better insulated you might opt to make it cooler or warmer to be more comfortable. You might take a drive to the beach with your savings or buy a bigger car.

And the mandate will be a tax on other rate payers. According to Severin Borenstein, E.T. Grether Professor of Business Administration and Public Policy at the Haas School of Business writing to Commissioner Weisenmiller, “The savings calculated for the households are based on residential electricity rates that are far above the actual cost of providing incremental energy, so embody a large cross subsidy from other ratepayers. This would be a very expensive way to expand renewables and would not be a cost effective practice…” In a nutshell, the LA Times editorial board and the CEC cooked the numbers.

The state is spurring innovation and job creation in the clean-energy sector. (California is ranked first in the nation for solar industry jobs at 86,000 — seven times more than the second-ranked state.)

Whenever you hear about government “spurring innovation and job creation”it is to cover the noise of cash being sucked from your bank account. Pork rarely innovates anything. And, the number of jobs is not a good thing. It is the opposite of a good thing for the majority of us—the people paying for electricity and for stuff made with that electricity. The electricity made with solar costs more because it takes forty people in solar to produce the same amount of electricity produced using natural gas. Lots of Jobs per KWH is Bad, not Good. [5]

The Times board sums up their argument with, At the moment, there’s simply no better way to reduce the power demand and greenhouse gas emissions from new residential developments than combining solar power with more energy-efficient designs. The long-term savings, both to homeowners and to the environment, are well worth the up-front cost.

I can think of several reasons for the editorial board lobbing this insane whopper. The possibility that I favor is they have their heads so far up their asses they can’t see more obvious possibilities, such as nuclear.[6] Robert Bryce said in a talk he gave, “There has been a continuing pursuit of density, and, more particularly, power density. And yet now when it comes to energy production, we are told we should go the other way. Toward low power density….This makes no sense. I’d call it insane but it would be an insult to crazy people.”

In an insult to crazy people, California is requiring a hella-expensive feel good virtue signal and shutting down its power-dense, carbon-free nuclear power plants and replacing them with natural gas and coal (forget the solar panels—they all make power at the same time—driving down the value of the electricity they produce.)

Footnotes

No. He lies like a cheap rug. Cardboard suitcases are stronger than this case’s raison d’être. The case isn’t very strong at all.

Translation: “The fix is in.”

Also known as cronyism, venture socialism, corporatism, mercantilism, or just plain horse droppings. “Unlike in a free market capitalist system, under crony capitalism it is often more profitable for businesses to spend resources lobbying legislators for handouts in the form of grants, loans, or tax advantages, and protections against competition in order to increase their profits.In turn, the government’s willingness to hand out special privileges promotes the politically well-connected rather than those who seek to earn the preference of investors and consumers based on merit. The gains of such activities usually accrue to the businesses and politicians involved at the expense of consumers and taxpayers.” http://library.intellectualtakeout.org/library/business-and-economics/free-market-capitalism-vs-crony-capitalism

See Footnote 1

Imagine going to Burger King for dinner and, by law, each BK must employ 40 times the people it would normally at $15 per hour to make your meal. The result is one hellaciously expensive burger.

“Of all ignorance, the ignorance of the educated is the most dangerous. Not only are educated people likely to have more influence, they are the last people to suspect that they don’t know what they are talking about when they go outside their narrow fields.”- Thomas Sowell